By Neil Fry
November 1 2012

This is the final part of Neil Fry's audit of the second part of Wenger's reign. Parts 1-5 can be accessed at the bottom of this page.In this sixth and final part Neil gives his verdict on the Wenger years without Dein.

Conclusion:  Second period of Monsieur Wenger’s reign

Arsenal’s Board took the revolutionary decision to relocate the Club from its long historic home to the new-build Emirates Stadium, which opened in 2006.  This did not as was intended, it transpired, help keep the Club at the top of the football ladder or put it in a position to be a leading European club.  If anything, the debt repayments appear to have become something of a footballing albatross.   For the timing of funding being completed for the stadium relocation and construction work beginning on the Emirates site and significant changes in footballing matters appears more than co-incidental. 

Nevertheless, there is a common problem for top football clubs of their old and longstanding stadium homes being located in built up, often residential, areas with little or no room for expansion.  The modern day’s financial necessities are for stadiums to maximise attendances and match-day revenue through capacity and corporate income generated by hospitality and conference suites.   The club’s relocation has long since solved the problem - in contrast to, for instance, Chelsea, Tottenham and Liverpool – all struggling to find and / or finance new homes.  Given the financial changes in top-level football since the re-location, including the relatively sudden footballing successes of Chelsea and Manchester City because of high-spending foreign benefactors, it would appear that the Club’s long-term future has been well served by the move to The Emirates Stadium and the then Board’s very significant foresight.  The particular efforts of the late Mr Fiszman, and Director Mr Friar, in steering the project to its successful conclusion should be recognised. 

Under Mr Kroenke’s ownership such patterns of benefaction have not been repeated, rather the self [sic]-sustainability model has been retained and Mr Kroenke has demonstrated his faith in the existing senior management.  He would appear a good  custodian of the Club, given its traditions and history.  Whereas, for example, Chelsea’s foreign owner and his short-term methodology, for all his club’s success under a succession of managers, would appear a rather ill-fit.  And indeed, for every short-term success like Chelsea that was sold to a high spending benefactor, there is a football club with a long and proud history and tradition, such as Portsmouth and Glasgow Rangers, in long-term ruin.

In light of the abandonment of the key policies that underpinned the self-sustainability model and the new and enhanced coaching regime, Arsenal - at the time of writing - have made a relatively encouraging start to the 2012 – 2013 season.  With the addition of three key, experienced, signings, all at a sensible and very reasonable cost, the squad seems much stronger generally and the new defensive coaching regime appear to have had a significant impact and greatly improved the whole team’s defensive competence. 

The key concern would be that the squad is now just one player short, at the very least,  of what may be necessary to challenge key rivals and return to the first period of trophy success – a top level centre-forward, conventional or otherwise, to replace Mr Van Persie following the exit he so desired.

Matters of evident concern

1.  Player recruitment policy – transfer spend

Monsieur Wenger’s ‘great decisions in regard to personnel’ appear rather more confined to the first period of his reign than the second.  The evidence suggests that Monsieur Wenger and his scouting network’s magic in the transfer market appears to have waned significantly.  Last season, Messrs Carr and Pardew, Newcastle United’s chief scout and manager, set the new benchmark with a raft of successful good value continental player acquisitions that had been largely absent for some time at Arsenal.[56]

Despite the clear evidence to the contrary in terms of the players recruited during the summer transfer window spending in 2011, the Chief Executive gave assurances that the second player recruitment policy’s emphasis on young players would continue.  The evidence of subsequent player recruitment around the summer of 2012 suggests quite the contrary: the policy appears to now have been totally abandoned.  The return to the types of successful experienced players, and the often highly intuitive signings of others, recruited under the first player recruitment policy is very welcome (and there are recent signs that the scouting success of old appears to be mounting something of a comeback too). 

Unfortunately, the thoroughbred stallions have already bolted and successive captains and star players have expressed their lack of confidence in the Club’s leadership and elected to go to more ambitious trophy winning clubs, with curved wage structures. 

Above all, given Monsieur Wenger’s very evident general competence as a manager, there has never been a need to pay the high transfer sums and wages paid by key rivals with big spending benefactors.  This seems something of a straw camel and there was never a necessity for the excessive and totally counter-intuitive focus on the development of young players.  Indeed, the 2012 – 2013 first team, at the time of writing, has been assembled without young transfer signings - Mr Jenkinson, having had an excellent start to the new season covering for injured Monsieur Sagna, excepted.  And at a perfectly reasonable cost, without any evidence of excessive wages, and is no apparent threat to the self-sustainability model. 

2.  Player recruitment policy – wage spend

Monsieur Wenger’s perceived success, in the second period, in using a relatively high wage spend well and his capacity to extract value is not entirely borne out by the available evidence.  Arsenals 2011 wage spend was £124.4m, not surprisingly way behind Chelsea and the Manchester clubs, and a little behind Liverpool’s, coming in fifth highest in the Premier League.[57]  Nevertheless, Tottenham Hotspur’s very significantly lower spend of £91.3 was spent, under the astute Chairman Mr Levy, on what appeared to be a very much more financially efficiently assembled squad of players than Arsenal’s.  Arsenal’s 2012 wage spend rose further to £143m - which represented 60.9 per cent of the club's football revenues.  For the policy has been completely undermined by the large size and composition of the Club’s squad and the wage structure. 

At the AST Q & A meeting, the Chief Executive stated that it was a general issue within the game at large that players were rewarded early and on future performance, never past.  This seems somewhat disingenuous – with, for instance, the Club’s own example of Senor Arteta contracts for his first and second seasons suggesting otherwise.  Mr Gazidis said Arsenal took necessary risks as part of the strategic business model (as part of the new second period player recruitment policy), Arsenal had a flatter wage structure and a big squad with few star players and Monsieur Wenger had an ethos of everyone contributing.  Nevertheless, his admission that the Club needed to adjust the model - over time, as contract renewals permit[58] - is very welcome, for it is also proved a demonstrable failure.  This will take time as contracts, such as the four year contract recently awarded to Mr Djourou earlier this year, run to their end.

As a consequence of the large squad and flat anti-meritocracy wage structure (somewhat akin to philosophical communism), wage spending has led to poor returns from fringe players that have languished on loan, on the bench, or out of match-day squad completely, for long periods.  Given their failure to demonstrate their current competences, their transfer sell-on value is often negligible as a result and their salaries are so out of kilter with their performances that few clubs would be prepared to fund such players’ existing lifestyles – let alone their star players effectively subsidise them.  

3.  Monitoring and acting

The evidence suggests that the immediate cause of the seven year trophy drought was the above policies.  Monsieur Wenger’s repeated confidence that they would play winning dividends on the pitch were highly counter-intuitive and in defiance of a succession of Club legends and present players and Captains.  Monsieur Wenger’s confidence has proven totally unfounded.  Yet the causes of the failings went uncorrected by him (or the Board) until the catastrophic start to the 2011 – 2012 season, and its legacy, precipitated the 7^th, and most difficult year, of the trophy drought.

Those policies were not, however, inherently flawed and doomed to failure.  For, the underlying causes were critical failings in defensive coaching and a lack of on the pitch leadership and experience.  These failings could have been easily remedied in a timely manner and the model bolstered with a few experienced signings that should have benefited the team, particularly at key stages of the season, and helped younger players development.  The aforementioned Mr Jenkinson, for instance, would appear to be a good example of this.  The difference between his performances this season, which have attracted the interest of England, and those last season, not least in the 2 – 8 defeat speak volumes.  As a consequence, throughout the second period the Arsenal team often appeared just two or three signings short – of players (usually defensive, including goalkeeper and defensive midfield) possessing the necessary competences and leadership skills. 

Unfortunately, Monsieur Wenger had often appeared to prioritise the longer term - and waited for developments in players’ competence and loyalty that never materialised.  The lack of necessary corrective action in the 2011 and 2012 January transfer windows further demonstrated this.  Whilst loyalty & patience are admirable qualities in life, the managers of key rivals such as the Manchester clubs and Chelsea have often been rather more decisive and ruthless than Monsieur Wenger, in football matters, and reaped the consequent dividends.  For, as others - from former rival Chelsea manager Senor Mourinho in football, to the management of Team GB in the 2012 Olympics – have demonstrated, an obsessive attention to detail to gain small competitive edges that all can add up to winning effect in very competitive environments can be crucial.  

4. Risk management

The Chief Executive’s assertion that the Club took necessary risks as part of the strategic business model is not entirely borne out by the available evidence either.  For there appear to have been repeated failures in proportionate risk management in a number of significant areas:  The failure to accurately balance the likely benefits of the player recruitments policy against its potential high risk costs created significant and unnecessary risks (particularly regarding the risks of inexperience and player loyalty – and its, detrimental impact on others).  An over-reliance on a small amount of key players and lack of cover for key positions.  And when the extent of the risks became clearly evident, the failure address the policy failings in a timely manner allowed the exposure to continue.  The Board’s great faith in the FFP rules being properly implemented and policed, also presents a risk, as the history of regulatory law suggests that this has not always been the case: breaches go undetected or penalties are insufficient to be an effective deterrent, breaches get covered up, and above all, loop-holes are found and exploited.

5.  Financial matters

The Club’s frequent assertions of financial prudence are, once again, not entirely borne out by the available evidence.  In addition to the question of the efficiency of the wage spend, considerable economic benefits from trophy success have also been missed:  through prize money, marketing and merchandising, improving the global brand and fan-base, and sponsorship.  A full cost / benefit analysis of the player recruitment policies would be instructive. 

In addition, even under Mr Kroenke’s ownership, there has also been an apparent need for excessive supporter pricing – particularly when compared to successful key rivals.   Indeed, The BBC Sport Price of Football survey just released[59], found that Arsenal are the most expensive club to visit for a second successive year.  The most expensive adult match-day ticket is Arsenal at £126 and Arsenal also have the most expensive season ticket at £1,955.  Malcolm Clarke, chairman of the Football Supporters' Federation, said  

Despite the difficult economic times we live in, prices at some clubs and at some levels of the game are still exceedingly high … It is quite shocking that at Arsenal, for example, the cheapest season ticket is only £15 short of £1,000.

A trip to the Emirates Stadium can cost as much as £134.40 with top-price tickets going for £126, a £26 rise on last year's figure and a programme (£3), pie (£3.30) and cup of tea (£2) adding to the cost.  Arsenal's cheapest day out comes in exactly £100 cheaper and Chief Executive Ivan Gazidis told BBC Sport the club was doing its best to offer value to fans and the club's cheapest Premier League ticket, at £26, is £9 cheaper than last season.

A financial analysis of the Club’s accounts, including director remuneration, is beyond the scope of this audit.  However, it is worth noting that there have been concerns over debt repayments from financing the building of the Emirates and over the lack of transfer spending from cash reserves.   A lack of growth in the football operation since 2009 was also noted - whilst rivals such as Manchester United have powered ahead financially.  The renewal of Club’s two, necessarily very longstanding, Tier One sponsorship arrangements in 2014 offer crucial opportunities.  Returning to the footballing operation, a financial analyst has also noted that the business model is heavily reliant on player sales.[60]  This may have contributed to the Board’s acquiescence to become a feeder club for key rivals.  Indeed, the latest results incorporate the sales of Messrs Fabregas and Nasri (but not Mr Van Persie) which helped make a profit from player trading of £26m. 

6.  Benchmark / Target setting

The senior management and Board’s apparent failures in monitoring, reviewing and taking decisive action may, in part, be fuelled by a lack of transparency and clarity over responsibility and accountability and benchmark setting for the footballing operation in the wake of the decision to re-locate to the new stadium.  For the extent of limitations, or otherwise, placed on Monsieur Wenger, and his willingness in acquiescing to them remains unclear.  Nevertheless, it appears likely that, given the ethos of the Club, his success in his first period, and the Board’s repeated comments during the second, that Monsieur Wenger has enjoyed a great deal of autonomy concerning the footballing operation matters and, if there were constraints on his spending, the emphasis on young players and flat wage structure, were his policies alone.

Board lacks clear target

In terms of targets, the available evidence seems to suggest that 4^th place and Champions League qualification is the Club’s informal and unstated benchmark (but failure to qualify manageable in terms of the robustness of the business).  For beyond Champions League qualification, a confusing pattern has, emerged regarding footballing targets and objective setting during recent years.  No top-level strategic performance standards or benchmark setting in respect of expected seasonal outcomes has made public by the Board.  The suspicion is that actually winning a competition is now regarded by the Board as merely representing an additional bonus.  

7.  Composition of Board

Arsenal’s technically skilled workforce has varied from young players who never developed all the competences and loyalty expected at one end, to successive Club Captains and star players at the other.  Clearly, despite an often obvious affection and respect for Monsieur Wenger – many, including some very significant players, have not had sufficient confidence in the Club’s strategies, policies and, above all, operational footballing ambition during the second period of his reign.  Neither, it appears, have had many other stake-holder’s – not least season ticket holders who have been forced to subsidise the second period of (relative in comparison to Monsieur Wenger’s first period) on the pitch failure. 

To return to the metaphor of philosophical conservatism, its weakness, it is alleged, is a tendency toward complacency and to accept the status quo even when it is unacceptable.  This would be a plausible explanation for the above failings.  For, there appears to have been a general reluctance to refresh the footballing operation with outside ideas and the revolutionary changes of Monsieur Wenger’s first period appear to have given way to a lack of innovation - and a certain sterility was evident over a number of years.  This also appears evident in the Board’s stated desire to retain its current composition and deny Mr Usmanov a presence or Mr Dein a return.  There appears to be a very significant support for the latter.  For, it is hard to avoid the conclusion that the Club is very much weaker without Mr Dein’s great breadth of footballing experience and expertise, not least in player recruitment and contractual matters, and his general operational footballing thoughts.  And given Monsieur Wenger’s extraordinary service to the Club, and professionalism and loyalty during the difficult second period of his reign, surely he deserves (should, of course, the long excluded Mr Dein be willing) the return of his best critical friend.

References

[56]  http://www.bbc. co.uk/sport/0/football/18355201

[57]  http://www.bbc.co.uk/news/business-19061040

[58]  http://arsenaltrust.org/news/latest-news/ivan-gazidis-qa-report

[59]  http://www.bbc.co.uk/ sport/ 0/football/19984968

[60]  swissramble@ blogspot.co.uk/ 2011/ 10arsenals-finances-21-questions.html & http://arsenaltrust.org/news/latest-news/ivan-gazidis-qa-report

Neil A. Fry

19 October 2012

Bristol;  Bow, London;  Alcadeisa, near La Línea de la Concepción, España.   

nafry.arsenalaudit@hotmail.co.uk